Each Monday 401kBasics posts a new tip as a part of our series “Plan Sponsor Quick Tips”. This series is designed to assist plan sponsors in filling their fiduciary role and running their retirement plan efficiently. Your feedback or suggestions on future articles is welcome.
Over the next few weeks 401kBasics is going to review the common mistakes that plan sponsors make in administering their plan, how to find the mistake and how to correct the mistake. The eighth common mistake is failure to determine if the timely deposit elective deferrals.
- How to Find the Mistake: Determine the earliest date you can segregate deferrals from general assets; compare that date with the actual deposit dates and any plan document requirements.
- How to Fix the Mistake: For both VFCP and EPCRS, deposit into the plan’s trust all elective deferrals withheld and applicable earnings resulting from the late deposit of amounts to the trust. The correction programs available include SCP, VCP and Audit CAP, depending upon the situation.
This mistake can be avoided in the future by coordinating with payroll provider to determine the earliest date you can reasonably segregate the deferral deposits from general assets. Set up procedures to ensure that deposits are made by that date. For more information please refer to potential mistake number 8 on the IRS 401(k) Fix-It Guide.
This site is for entertainment purposes only. 401kBasics and it’s authors are not financial advisors and no information found on this site should be construed as financial advice.